How about a New Year’s Resolution that’s possible to keep, and life changing?

The foundation of all financial planning is a budget. I know that’s not an exciting or fancy resolution, but it is achievable; and has much longer positive effects than another fad diet. It can set you on the track of finally taking control of your finances, or refining them. It’s impossible to make any determinations about your future if you don’t know what you’re spending today. I also want to dispel the myth that budgets are only for people living paycheck to paycheck. Everyone needs a budget!

It doesn’t have to be painful. There is more than one way to do it. It doesn’t have to feel like you are depriving yourself, or that it’s a punishment. In fact, a budget done and followed properly should feel freeing and empowering. 

So, where do you start? The first step is not actually to create a budget. That is a set up for failure. You can’t just determine what you think seems like the right amount you should be spending, and try to hold yourself to it. Generally, our initial thoughts about what a budget should be are based on what we have heard in passing over the years. Here’s the issue that I have with that - we don’t have the same life, goals or plans as anyone else. Without knowing your exact situation no one can tell you what your budget should be. There isn’t a formula for budgeting that will be successful for everyone. It needs to be custom to you. You have to determine what’s right for you. If we’re going to be controlling our spending we have to know why. It has to make sense. There has to be a broader plan of what you would be doing with your money if you weren’t spending on loans and credit card bills.  Write it down. This is the start of your budget. 

From here you can do a few things. You can create a budget that is based on needs only. You can create a budget that illustrates the lifestyle that you would want. See how close you are. What does it take to get to those numbers? Or you can create an adaptive budget that has all of your needs covered, and starts to add in more of the wants. The adaptive budget changes as your expenses on needs goes down (loans paid off) or your income goes up.

Logistically, we do need to look at your expenses and earnings to see where you stand. We’ll go over what that looks like next week. In the meantime, if you would like to get started, sign up for my budget workshop or become a financial planning client. Budgeting is one of the included benefits! If you are a financial planning client I create the budget for you.